Remaining calm in times of uncertainty
By Marc Burman, Partner at Foster Denovo.
There are a number of business owners out there who are panicking right now as the current climate has led to a number of people feeling that they need to take some form of action, particularly in relation to their investments.
This will mainly be DIY investors who feel the need to sell their investments which is not always the best approach. There is now a sale on in the market and, during a sale, investors should consider buying rather than selling.
If you have clients that have a time frame of three years or more and they have excess income or capital that can be set aside for at least 3 years, they should be taking advantage of the current situation.
A strategy a number of my clients are utilising is to drip feed investments into the market by initially using up their tax-free investment allowances.
As to the market itself – viruses have been with us forever, while technically the market generally has been looking for a reason to reset after the longest bull market in history. There is NO systemic risk as there was in 2008. Governments are intervening in the markets to stabilise them, and the private banking sector is very well capitalised. It feels more like 9/11 than it does like 2008, i.e. after an immediate rally, full recovery to pre 9/11 figures took place within less than 30 months, with bank liquidity not in question.
So, I’m advising my clients to take the longer-term view, potentially taking advantage of the temporary market decline, where appropriate, and remember that volatility is the ‘admission price’ for the long-term gains that the market provides.
I have enclosed a chart produced by Charles Shwab, that re-enforces the concept that taking a long-term view is the best approach to take when investing even when considering the effect of world epidemics.
The information presented here is for illustrative purposes only and does not provide sufficient information on which to make an informed investment decision. This information is not intended and should not be construed as an offer, solicitation or recommendation to buy or sell any specific investments or participate in any investment (or other) strategy. Potential investors should seek professional advice concerning the suitability of any investment. Potential investors should be aware that past performance is not an indication of future performance and the value of investments and the income derived from them may fluctuate and they may not receive back the amount they originally invested. The tax treatment of investments depends on each investor’s individual circumstances and is subject to changes in tax legislation. Foster Denovo is authorised and regulated by the Financial Conduct Authority.
